1.

MONEY

Money is an economic good that functions as a generally recognized

medium of exchange in circulation in an economy. Money provides the service of
reducing transaction cost, namely the double coincidence of wants. Money
originates in commodities that have appropriate physical properties to be
adopted by market participants as media of indirect exchange. Money can include
these kinds of market-determined moneys: officially issued legal tender or fiat
moneys, money substitutes and fiduciary media, or potentially even electronic
cryptocurrencies.

 Money is a generally recognized medium of exchange in an economy that is

used to facilitate indirect exchange of other goods and services.
 Money eliminates the transactions cost associated with the double
coincidence of wants that occurs in barter.
 Money can come in many forms, including market-determined money, fiat
money, money substitutes, or fiduciary media.
 Cryptocurrencies may represent a new form of money that is emerging in
modern markets.

Understanding Money
Also referred to as currency, money is a liquid asset used in the settlement of
transactions that functions based on the general acceptance of its value within an
economy. A currency's value is not necessarily derived from the materials used to
produce the note or coin. Instead, the value is derived from the public's
willingness to agree to the displayed value and rely on it for use in future
transactions. This is money's primary function: a generally recognized medium of
exchange that people intend to hold as and are willing to accept as payment for
current or future transactions against other goods and services.

Money allows the economy to function on the basis of indirect exchange instead
of direct exchange (barter or gift economy), by overcoming the double
coincidence of wants. The double coincidence of wants is a ubiquitous problem in
a barter economy, where in order to trade each party must have something that
the other party wants. When all parties use and willingly accept money, they can
avoid this problem.

In order to be more useful as money, a good should be: 1) fungible, 2) durable, 3)

portable, 4) recognizable, and 5) stable. These properties ensure that the benefit
of reducing or eliminating the transaction cost of the double coincidence of wants
is not outweighed by other types of transaction costs associated with that specific
good.

Fungible
Units of the good should be of relatively uniform quality, so that they are
interchangeable with one another. If different units of the good have different
qualities, then their value for use in future transactions may not be reliable or
consistent. Trying to use a non-fungible good as money results in transaction
costs of individually evaluating each unit of the good before an exchange can take
place.

Durable
The physical character of the good should be durable enough to retain its
usefulness in future exchanges and be reused multiple times. A perishable good
or a good that degrades quickly with use in exchanges will not be as useful for
future transactions. Trying to use a non-durable good as money conflicts with
money's essentially future-oriented use value.

Portable
It should be divisible into small quantities that people appreciate its original use
value highly enough that a worthwhile quantity of the good can be conveniently
carried or transported. An indivisible good, immovable good, or good of low
original use value is not suitable as money. Trying to use a non-portable good as
money produces transaction costs of either physically transporting large
quantities of the low value good or defining practical, transferable ownership of
an indivisible or immobile object.

Recognizable
The authenticity and quantity of the good should be readily ascertainable to the
users so that they can easily agree to the terms of an exchange. Trying to use a
non-recognizable good as money produces transaction costs of agreement on the
authenticity and quantity of the good by all parties to an exchange.

Stable
The value that people place on a good in terms of the other goods that they are
willing to trade should be relatively constant or increasing over time. A good
whose value is varies widely up and down over time or consistently loses value
over time is less suitable. Trying to use a non-stable good as money produces
transaction costs of repeatedly revaluing the good in each successive transaction
and the risk that the exchange value of the good might drop below its other direct
use value, in which case it will no longer circulate as money.

Secondary Functions of Money

As stated above, money primarily functions as a medium of exchange. However, it
also has developed secondary functions in the economy that derive from its use
as a medium of exchange. These other functions include: 1) a unit of account, 2) a
store of value, and 3) a standard of deferred payment.

Unit of Account
Due to its use as a medium to exchange for both buying and selling and its use to
assign prices to all kinds of other goods and services, money can be used to keep
track of the money gained or lost across multiple transactions and to compare
money values of various combinations of different quantities of different goods
and services mathematically. This makes things such as accounting for profit and
loss of a business, balancing a budget, or valuing the total assets of a company all
possible.

Store of Value
Because money's usefulness as a medium of exchange in transactions is
inherently future-oriented, it provides a means to store value obtained through
current production or trade for use in the future in the form of other goods and
services. In particular trading their non-fungible, non-durable, non-portable, non-
recognizable, or non-stable goods or services for money here and now, people
can store the value of those goods to trade for goods at other times and places.
This facilitates saving for the future and engaging in transactions over long
distances possible.

Standard of Deferred Payment

To the extent that money is accepted as a general medium of exchange and
serves as a useful store of value, it can be used to transfer value for exchange use
at different times between people through the tools of credit and debt. One
person can loan a quantity of money to another for a period of time to use and
repay another agreed upon quantity of money at a future date. The stored value
represented by the loaned money is transferred from the lender to the borrower
in exchange for an agreed quantity of stored value in the future. The borrower
can then use and enjoy the value of other goods and services that they can now
purchase in exchange for payment at a later date. The lender in effect is able to
loan the current use of real goods and services, which he does not himself
originally possess, to the borrower. The sellers of the goods are able to receive
payment for their goods now instead of loaning the goods directly to the
borrower in hope of future return or repayment.
Market-determined Money
Money originates as a feature of the spontaneous order of markets through the
practice of barter (or direct exchange), where people trade one good or service
directly for another good or service. In order for a trade to occur in barter, the
parties to the exchange must want the good or service that their counterparties
have to offer. This is known as the double coincidence of wants, and it sharply
limits the scope of transactions that can occur in a barter economy.

However certain goods in a barter economy will be generally desired by more

people in trade for whatever they have to offer in barter. These tend to be goods
that have the best combination of the five properties of money listed above. Over
time these special kinds of goods can come to be desired in trade partly for their
wide acceptance, as a means to overcome the problem posed by the double
coincidence of wants in future transactions with others. Eventually people can
come to desire a good mostly or solely for its use value in reducing transaction
costs in future exchanges.

Such a good can then be called money, because it is generally recognized by

participants in the economy as a valuable good for its use as a medium to
indirectly exchange other goods and services between multiple parties. The
physical commodity will still have some other use value, but the primary use any
source of value has in the market is for its use as money. Historically, precious
metals like gold and silver were adopted as these kind of market-determined
moneys.

Legal Tender and Fiat Money

Sometimes a market-determined money based on some commodity good is
officially recognized as legal money by a government. Under some circumstances,
goods that do not necessarily meet the five properties of optimal market-
determined money outlined above can be used to fulfill the functions of money in
an economy. Typically this involves a legal mandate to use a specific good as
money (known as a legal tender law) or some kind of prohibition on the use of
money (such as the use of cigarettes as a medium of exchange among prison
inmates). Legal tender laws specify a certain good as legal money, which courts
will recognize as a final means of payment in contracts and the legal means of
settling tax bills. By default, the legal tender will typically to be used as a medium
of exchange by market participants within the political jurisdiction of the
authority that declares it to be money.

Legal tender laws do not always adopt market-determined money as legal tender.
A new medium of exchange that does not serve any original non-money use as an
economic good can be imposed to replace market-determined money by legal
declaration. This type of legal tender can also be called fiat money. Fiat money
becomes a medium of exchange through legal imposition on the market, rather
than through the process of adoption by the market for easing transactions. Fiat
money often does not meet the general characteristics of money and the market-
determined money that it replaces. Because the fiat money tends to be less
suitable for use as money, market participants may be reluctant to adopt it as
money. Prohibitions (or even confiscation) of market-based money are sometimes
enacted as part of legal tender laws that impose fiat money on an economy.

Fiat moneys can lead to increased economic transactions costs, market

distortions, and unintended consequences to the extent that they do not meet
the characteristics that make a particular good suitable to serve as money. For
example, in modern times, most countries' legal tender moneys consistently lose
value over time, sometimes rapidly, leading to the social costs associated with
inflation.

Money Substitutes and Fiduciary Media

Physical units of a currency (cash) can circulate from hand to hand in the course
of economic transactions or by being reassigned from person to person for
accounting purposes, while being held on deposit at a bank or similar institution.
In the second case, tokens or paper notes that substitute for and represent the
deposited money are passed from person to person in daily transactions and
settled later by financial institutions. Paper notes and checks are examples of
these kind of money substitutes. The use of money substitutes can increase the
portability and durability of money, as well as reducing other risks. Money
substitutes enhance the function of money by allowing people to simultaneously
enjoy the use of their money in day-to-day transactions while also keeping the
money secure from theft or physical damage.

Normally however, banks issue a larger (often much larger) quantity of money
substitutes than the amount of physical currency entrusted to them by
depositors. By simultaneously issuing money substitutes corresponding to the
same units of physical money to both the depositors and borrowers to whom the
bank makes loans, in a process known as fractional reserve banking, banks can
dramatically expand the supply of money available for transactions beyond the
available supply of physical money. The new money substitutes that do not
correspond to new units of physical money are called fiduciary media of
exchange, since they exist solely as entries in the accounting and financial system
of the banks. Though widely accepted today, the use of fiduciary media has been
controversial. Some economists believe that the (over)issuance of fiduciary is to
blame for business cycles and economic recessions, while others welcome it as a
means to allow the expansion of money supply to suit the needs of the economy.

Cryptocurrencies
Cryptocurrencies, such as Bitcoin, are electronic accounting entries that can be
used as media of exchange, which share some characteristics of both market-
determined money and fiat money. Like fiat money, they do not originate from an
independent, non-monetary economic good; they originate as accounting units
that are assigned to users as compensation in return for helping to process and
verify transactions in their own cryptocurrency blockchain. Like market-
determined moneys however, they do reflect the value of an underlying good
(payment processing services) and are not (to-date) imposed legally as a legal
tender in place of other money. So far, cryptocurrecies have not been widely
adopted as media of exchange by most markets for daily transactions, and so do
not meet the normal definition of money, though they may develop the
appropriate properties for use as money. The use of cryptocurrencies as media of
exchange is largely limited to black and gray markets so far, and other users
generally treat cryptocurrencies as speculative assets rather than money.

1.1 Performance based rewards

1.1.1 Team Based Rewards

Rewards for performance are commonly used to maximize

work output and productivity. With the increased use of team-based
work, a variety of team-based reward systems have been developed,
with the intent of maximizing performance and satisfaction in work
teams. Team-based rewards are commonly defined as any formal
incentives provided to a work team or at least one of its individual
team members. Rewards may be based on organizational, team, or
team member performance or other outcomes (e.g., sales, customer
satisfaction, and profit).
Rewards provided to teams can be categorized as monetary or
nonmonetary. Monetary team-based rewards include one-time cash
bonuses, permanently increased base salary, and variable pay (i.e.,
earning a specified percentage of base salary). Nonmonetary team-
based rewards include achievement awards, time off work, and
special dinners. Team-based rewards can be distributed equally
across team members, so that all members receive the same reward
(e.g., amount of money, recognition award), or nonequally, either
based on individual performance within the team (i.e., equitably) or
in proportion to individual base salary.
 There are seven major categories of team-based rewards:

 Team gainsharing/profit sharing. Team rewards are tied to organizational

outcomes; rewards are generally cash in nature and shared equally among
all teams in the organization. With profit sharing, the organizational
outcome is financial in nature (e.g., organizational profit); gainsharing
refers to nonfinancial organizational outcomes (e.g., overall company
customer satisfaction, improvements in organizational productivity or
quality).
 Team goal-based rewards. The organization (often in conjunction with the
team) formulates goals or targets for each team that are believed to reflect
effective short- or long-term performance outcomes (e.g., predetermined
production objectives, customer ser-vice goals). When the team meets its
goal(s), it earns predetermined reward(s).
 Team discretionary rewards. Also known as spot rewards, these team-
based rewards, like goal-based rewards, evaluate team outcomes (e.g.,
customer satisfaction, team productivity) when determining whether a
specific team should be provided with incentives. Unlike in goal-based
systems, however, the team is not provided with a predetermined
performance standard that will guarantee the receipt of a specific
predetermined reward. Instead, when the organization determines a team
has done an outstanding job, the team is provided with a reward.
 Team skill rewards. Teams are rewarded for acquiring valued skills (e.g.,
collaboration, cooperation, interpersonal understanding) regardless of
team outcomes, following the rationale that if such skills improve, desired
outcomes will eventually be achieved. Skills are generally evaluated by
supervisors.
 Team member skill rewards. Individual team members are rewarded for
acquiring team-related skills (e.g., adaptability, communication, leadership,
initiation of ideas). Skills are generally evaluated by other team members
and/or supervisors.
 Team member goal-based rewards. Individual team members are
rewarded when they achieve predetermined performance goals, often in
conjunction with quarterly or annual formal performance evaluations.
 Team member merit rewards. Individual team members are rewarded
when they make an outstanding contribution to the team, as determined
by other team members and/or supervisors.
Research on Team-Based Rewards
Research on team-based rewards has generally lagged behind other
categories of work team research. Although much additional research is
required, existing work suggests that team-based rewards may have
greater impact on the productivity of lower-performing team members.
Additionally, highest-performing employees appear to prefer individually
based rewards. An accumulating body of evidence suggests that as team
interdependence increases, team-based rewards are most effective when
based on equal rewards for team members; otherwise, group cohesiveness
and performance may be negatively affected.
Team-Based Reward Effectiveness
To date, practical experience suggests that several factors need to be
considered when choosing a team reward system. As noted above, the
majority of these guidelines have not been the target of substantial
research.
 Team interdependence. High within-team interdependence (e.g., need for
cooperation in performing tasks and meeting team goals) suggests the need
for equal distribution of rewards among team members. Current research
does not clearly support the belief that such reward systems encourage
slacking among team members. Equitable reward systems may be more
useful for less interdependent teams. To the extent team cooperation is
required throughout the organization (i.e., high between-team
interdependence), profit-sharing systems may be most effective.
 Full- versus part-time teams. Full-time work teams may benefit most from
clear, predetermined performance targets. Skills incentive systems may be
useful for these teams, as they encourage team members to learn one
another’s tasks. When tenure on a work team is part-time and temporary,
an important consideration is ensuring that team-based rewards are not so
enticing that they conflict with other (non-team) job responsibilities.
 Line-of-sight. As the basis for reward is further outside of the team’s
immediate control (commonly termed the line-of-sight problem), reward
systems may become less effective. This is a particular concern in large
organizations, where individual teams may perceive little direct control
over organizational outcomes as a whole (e.g., organizational profit).
 Measurable performance standards. It is important to ensure that it is
possible to measure aspects of performance that are the basis for rewards.
This may be particularly critical when it is necessary to assess contributions
of team members relative to team outcomes; otherwise, rewards may be
perceived as unjust.
 Additional factors. Other factors that influence team-based reward
effectiveness may include team composition (same or mixed gender; same
or mixed occupation teams); organizational context factors (e.g., type of
industry, size of organization); and team pressures (e.g., time pressure,
stress), to name a few.

1.1.2 Individual based rewards

Individual based rewards, the norm in many industries, pays

wages strictly based on individual performance. It can be comprised
of hourly wages, sales commissions and subjective periodic reviews.
While tasks may be intertwined among the members of a team,
every employee is typically measured and compensated based on his
contribution to the team, not the team's final deliverable. The
positions most likely to receive this kind of compensation are
commission sales, assembly and non-technical labor positions among
many others.
Individual compensation pays specifically based on individual
performance regardless of team performance. This provides more
pay to higher-achieving employees and less pay to lower-achieving
ones. It allows for competition among employees for prestige and
pay which provides a strong incentive to perform. It also avoids
punishing employees based on the poor performance of fellow team
members, resulting in better morale for the individuals. This
compensation may also seem more personal, especially to higher-
performing employees.

Individual compensation can breed unethical competition as in

commission sales when staff members fight over a customer or
a sale. Employees posturing for a better positions or rankings
at the exclusion of teamwork can come from this method.
Information and work techniques may pool with motivated
employees to the exclusion of those who need to be trained.

1.1.3 Organizational based rewards

Reward systems in organizations can be thought of as serving three

distinct but related purposes: attracting, motivating, and retaining
employees. Choices managers make about reward systems can affect
an organization's ability to hire and keep desirable employees in a
competitive labor market, and of course, rewards can affect people's
attitudes, feelings, and behaviors at work. Consequently, choices
about reward systems can be a major determinant of organizational
performance on a variety of dimensions.
There is a range of rewards that are distributed in organizations, both
tangible and intangible. Tangible rewards include pay and its variants
(e.g., base salaries, hourly wages, commissions, bonuses, profit
sharing, deferred compensation, stock options) as well as non-
monetary rewards such as promotions, private offices, company cars,
benefits, and other perquisites. Examples of intangible rewards
include recognition, personal satisfaction, pride, camaraderie, team
spirit, and self-actualization. Studies of human motivation highlight
the effects of both tangible and intangible rewards on behavior.
Maslow's “Hierarchy of Needs,” McClelland's “Need for
Achievement, Need for Affiliation, and Need for Power,” and
 Herzberg's “Two-Factor Theory of Motivation” are three classic
treatments of motivation and human needs. While this note focuses
primarily on monetary reward systems, many of the principles apply
equally well to non-monetary or intangible rewards.

2. 5 ways to improve rewards effectiveness

1. Performance based promotions

When employees understand that the only way they can earn more is to
perform at higher standards, they are generally more motivated. Providing
generous pay for performance with regular performance meetings each
quarter works better than a once-per-year evaluation.

2. Corporate recognition awards

Employees thrive in a work environment where they receive frequent
feedback and praise from superiors. This is particularly true when it comes
to Generation X and Y candidates. Simple certificates of achievement tied
to a special rewards program works nicely.

3. Industry educational support

In progressive workplaces, employees who are encouraged to become
lifelong learners often become top performers. Giving employees the tools
and resources to achieve industry certifications and degrees can help to
elevate the quality of work produced, while providing a meaningful career
incentive that’s recognized by all.

4. Corporate wellness programs

A healthy work environment means a productive environment. When
employees are given the resources to maintain health on-site, they tend to
make an effort to be more aware of their personal health.
Multiple studies have shown that corporate wellness programs can be used
to boost compensation plans and ultimately reduce many health related
costs.
 5. Flexible and collaborative work options
Employees are looking for ways to improve their work-life balance,
therefore offering the ability to work a flexible schedule or from a
collaborative home environment can be viewed as a major plus. When
presented as part of a compensation strategy, this can help your
recruitment and retention rates enormously.

3. JOB SPECIALIZATION

Job specialization is the process of getting your people to master a skill in

one specific job area so they can focus solely on that area and complete all
assignments with the minimum of supervision. Also called the division of labor,
job specialization may be a desirable goal for your business as it grows. Imagine
if you could have seasoned experts in each field at the forefront of your
organization. Your customers would love it, and productivity gets a boost as
everyone works faster and better in a familiar job function. That's what job
specialization provides.
3.1 Advantages of job specialization
When jobs roles are specialized, it leads to higher productivity.
Workers produce more when they occupy one specialized role. The
marked improvement in efficiency is due to employees becoming adept
at one specific job as they perform it day after day. Another time-saver is
the ability of the worker to focus on completing one job instead of having
to switch mental gears and change workstations to do another job.
Developing your own in-house specialists leads to industry recognition
and research breakthroughs. It contributes to employee status, attracts
high-caliber employees and much more.
 3.2 Disadvantages of job specialization
Specialization is not a one-size-fits-all panacea. Some generalists
thrive on being jacks-of-all-trades and having a variety of tasks on their
plate. These workers enjoy constantly learning new jobs and the flexibility
of working in several roles, and may grow restless if you trap them in one
job. The biggest concern some workers may have about specializing in
one job is job security. They wonder what might happen if their area of
specialty becomes obsolete. Staying abreast of the newest technologies
will keep your company innovative and ensure your workers' specialties
will not disappear in your business or the marketplace.

4. 3 ways to improve employee motivation through job design

4.1 Importance of Job Design

Many of us assume the most important motivator at work is pay. Yet,

studies point to a different factor as the major influence over worker
motivation—job design. How a job is designed has a major impact on
employee motivation, job satisfaction, commitment to an organization,
absenteeism, and turnover.
The question of how to properly design jobs so that employees are more
productive and more satisfied has received attention from managers and
researchers since the beginning of the 20th century. We will review major
approaches to job design starting from its early history.
 
4.2 Scientific Management and Job Specialization

Perhaps the earliest attempt to design jobs came during the era of
scientific management. Scientific management is a philosophy based on the
ideas of Frederick Taylor as presented in his 1911 book, Principles of
Scientific Management. Taylor’s book is among the most influential books
of the 20th century; the ideas presented had a major influence over how
work was organized in the following years. Taylor was a mechanical
engineer in the manufacturing industry. He saw work being done
haphazardly, with only workers in charge. He saw the inefficiencies
inherent in employees’ production methods and argued that a manager’s
job was to carefully plan the work to be performed by employees. He also
believed that scientific methods could be used to increase productivity. As
an example, Taylor found that instead of allowing workers to use their own
shovels, as was the custom at the time, providing specially designed shovels
increased productivity. Further, by providing training and specific
instructions, he was able to dramatically reduce the number of laborers
required to handle each job.
Scientific management proposed a number of ideas that have been
influential in job design in the following years. An important idea was to
minimize waste by identifying the most efficient method to perform the
job. Using time–motion studies, management could determine how much
time each task would require and plan the tasks so that the job could be
performed as efficiently as possible. Therefore, standardized job
performance methods were an important element of scientific
management techniques. Each job would be carefully planned in advance,
and employees would be paid to perform the tasks in the way specified by
management.
Furthermore, job specialization was one of the major advances of this
approach. Job specialization entails breaking down jobs into their simplest
components and assigning them to employees so that each person would
perform a select number of tasks in a repetitive manner. There are a
number of advantages to job specialization. Breaking tasks into simple
components and making them repetitive reduces the skill requirements of
the jobs and decreases the effort and cost of staffing. Training times for
simple, repetitive jobs tend to be shorter as well. On the other hand, from a
motivational perspective, these jobs are boring and repetitive and
therefore associated with negative outcomes such as absenteeism. Also,
job specialization is ineffective in rapidly changing environments where
employees may need to modify their approach according to the demands
of the situation.
Today, Taylorism has a bad reputation, and it is often referred to as the
“dark ages” of management when employees’ social motives were ignored.
Yet, it is important to recognize the fundamental change in management
mentality brought about by Taylor’s ideas. For the first time, managers
realized their role in influencing the output levels of employees. The
concept of scientific management has had a lasting impact on how work is
organized. Taylor’s work paved the way to automation and standardization
that is virtually universal in today’s workplace. Assembly lines where each
worker performs simple tasks in a repetitive manner are a direct result of
job specialization efforts. Job specialization eventually found its way to the
service industry as well. One of the biggest innovations of the famous
McDonald brothers’ first fast-food restaurant was the application of
scientific management principles to their operations. They divided up the
tasks so that one person took the orders while someone else made the
burgers, another person applied the condiments, and yet another wrapped
them. With this level of efficiency, customers generally received their order
within 1 minute.
Rotation, Job Enlargement, and Enrichment
One of the early alternatives to job specialization was job rotation. Job
rotation involves moving employees from job to job at regular intervals.
When employees periodically move to different jobs, the monotonous
aspects of job specialization can be relieved. For example, Maids
International Inc., a company that provides cleaning services to households
and businesses, utilizes job rotation so that maids cleaning the kitchen in
one house would clean the bedroom in a different one. Using this
technique, among others, the company is able to reduce its turnover level.
In a supermarket study, cashiers were rotated to work in different
departments. As a result of the rotation, employees’ stress levels were
reduced, as measured by their blood pressure. Moreover, they experienced
less pain in their neck and shoulders. Psychophysiological stress reactions,
trapezius muscle activity, and neck and shoulder pain among female
cashiers before and after introduction of job rotation. 
Job rotation has a number of advantages for organizations. It is an effective
way for employees to acquire new skills and in turn for organizations to
increase the overall skill level of their employees. When workers move to
different positions, they are cross-trained to perform different tasks,
thereby increasing the flexibility of managers to assign employees to
different parts of the organization when needed. In addition, job rotation is
a way to transfer knowledge between departments. Rotation may also have
the benefit of reducing employee boredom, depending on the nature of the
jobs the employee is performing at a given time. From the employee
standpoint, rotation is a benefit, because they acquire new skills that keep
them marketable in the long run.
Is rotation used only at lower levels of an organization? Anecdotal evidence
suggests that companies successfully rotate high-level employees to train
managers and increase innovation in the company. For example, Nokia uses
rotation at all levels, such as assigning lawyers to act as country managers
or moving network engineers to handset design. This approach is thought
to bring a fresh perspective to old problems. Wipro Ltd., India’s information
technology giant that employs about 80,000 workers, uses a 3-year plan to
groom future leaders of the company by rotating them through different
jobs.
Job enlargement refers to expanding the tasks performed by employees to
add more variety. By giving employees several different tasks to be
performed, as opposed to limiting their activities to a small number of
tasks, organizations hope to reduce boredom and monotony as well as
utilize human resources more effectively. Job enlargement may have
similar benefits to job rotation, because it may also involve teaching
employees multiple tasks. Research indicates that when jobs are enlarged,
employees view themselves as being capable of performing a broader set
of tasks. There is some evidence that job enlargement is beneficial, because
it is positively related to employee satisfaction and higher quality customer
services, and it increases the chances of catching mistakes. At the same
time, the effects of job enlargement may depend on the type of
enlargement. For example, job enlargement consisting of adding tasks that
are very simple in nature had negative consequences on employee
satisfaction with the job and resulted in fewer errors being caught.
Alternatively, giving employees more tasks that require them to be
knowledgeable in different areas seemed to have more positive effects.
Job enrichment is a job redesign technique that allows workers more
control over how they perform their own tasks. This approach allows
employees to take on more responsibility. As an alternative to job
specialization, companies using job enrichment may experience positive
outcomes, such as reduced turnover, increased productivity, and reduced
absences. This may be because employees who have the authority and
responsibility over their work can be more efficient, eliminate unnecessary
tasks, take shortcuts, and increase their overall performance. At the same
time, there is evidence that job enrichment may sometimes cause
dissatisfaction among certain employees. The reason may be that
employees who are given additional autonomy and responsibility may
expect greater levels of pay or other types of compensation, and if this
expectation is not met they may feel frustrated. One more thing to
remember is that job enrichment is not suitable for everyone.  Not all
employees desire to have control over how they work, and if they do not
have this desire, they may become frustrated with an enriched job.
Job Characteristics Model
The job characteristics model is one of the most influential attempts to
design jobs with increased motivational properties. Proposed by Hackman
and Oldham, the model describes five core job dimensions leading to three
critical psychological states, resulting in work-related outcomes.

Skill variety refers to the extent to which the job requires a person to utilize
multiple high-level skills. A car wash employee whose job consists of
directing customers into the automated car wash demonstrates low levels
of skill variety, whereas a car wash employee who acts as a cashier,
maintains carwash equipment, and manages the inventory of chemicals
demonstrates high skill variety.
Task identity refers to the degree to which a person is in charge of
completing an identifiable piece of work from start to finish. A Web
designer who designs parts of a Web site will have low task identity,
because the work blends in with other Web designers’ work; in the end it
will be hard for any one person to claim responsibility for the final output.
The Web master who designs an entire Web site will have high task
identity.
Task significance refers to whether a person’s job substantially affects other
people’s work, health, or well-being. A janitor who cleans the floors at an
office building may find the job low in significance, thinking it is not a very
important job. However, janitors cleaning the floors at a hospital may see
their role as essential in helping patients get better. When they feel that
their tasks are significant, employees tend to feel that they are making an
impact on their environment, and their feelings of self-worth are boosted.
Autonomy is the degree to which a person has the freedom to decide how
to perform his or her tasks. As an example, an instructor who is required to
follow a predetermined textbook, covering a given list of topics using a
specified list of classroom activities, has low autonomy. On the other hand,
an instructor who is free to choose the textbook, design the course
content, and use any relevant materials when delivering lectures has higher
levels of autonomy. Autonomy increases motivation at work, but it also has
other benefits. Giving employees autonomy at work is a key to individual as
well as company success, because autonomous employees are free to
choose how to do their jobs and therefore can be more effective. They are
also less likely to adopt a “this is not my job” approach to their work
environment and instead be proactive (do what needs to be done without
waiting to be told what to do) and creative. The consequence of this
resourcefulness can be higher company performance. For example, a
Cornell University study shows that small businesses that gave employees
autonomy grew four times more than those that did not. For example,
Gucci’s CEO Robert Polet points to the level of autonomy he was given
while working at Unilever PLC as a key to his development of leadership
talents.
Feedback refers to the degree to which people learn how effective they are
being at work. Feedback at work may come from other people, such as
supervisors, peers, subordinates, and customers, or it may come from the
job itself. A salesperson who gives presentations to potential clients but is
not informed of the clients’ decisions, has low feedback at work. If this
person receives notification that a sale was made based on the
presentation, feedback will be high.
The relationship between feedback and job performance is more
controversial. In other words, the mere presence of feedback is not
sufficient for employees to feel motivated to perform better. In fact, a
review of this literature shows that in about one-third of the cases,
feedback was detrimental to performance. In addition to whether feedback
is present, the sign of feedback (positive or negative), whether the person is
ready to receive the feedback, and the manner in which feedback was given
will all determine whether employees feel motivated or demotivated as a
result of feedback.
According to the job characteristics model, the presence of these five core
job dimensions leads employees to experience three psychological states:
They view their work as meaningful, they feel responsible for the outcomes,
and they acquire knowledge of results. These three psychological states in
turn are related to positive outcomes such as overall job satisfaction,
internal motivation, higher performance, and lower absenteeism and
turnover. Research shows that out of these three psychological states,
experienced meaningfulness is the most important for employee attitudes
and behaviors, and it is the key mechanism through which the five core job
dimensions operate.
Are all five job characteristics equally valuable for employees? Hackman
and Oldham’s model proposes that the five characteristics will not have
uniform effects. Instead, they proposed the following formula to calculate
the motivating potential of a given job:

MPS = ((Skill Variety + Task Identity + Task Significance) ÷ 3) × Autonomy ×

Feedback

According to this formula, autonomy and feedback are the more important
elements in deciding motivating potential compared to skill variety, task
identity, or task significance. Moreover, note how the job characteristics
interact with each other in this model. If someone’s job is completely
lacking in autonomy (or feedback), regardless of levels of variety, identity,
and significance, the motivating potential score will be very low.
 Note that the five job characteristics are not objective features of a job.
Two employees working in the same job may have very different
perceptions regarding how much skill variety, task identity, task
significance, autonomy, or feedback the job affords. In other words,
motivating potential is in the eye of the beholder. This is both good and bad
news. The bad news is that even though a manager may design a job that is
supposed to motivate employees, some employees may not find the job to
be motivational. The good news is that sometimes it is possible to increase
employee motivation by helping employees change their perspective about
the job. For example, employees laying bricks at a construction site may
feel their jobs are low in significance, but by pointing out that they are
building a home for others, their perceptions about their job may be
changed.
Do all employees expect to have a job that has a high motivating potential?
Research has shown that the desire for the five core job characteristics is
not universal. One factor that affects how much of these characteristics
people want or need is growth need strength. Growth need strength
describes the degree to which a person has higher order needs, such as
self-esteem and self-actualization. When an employee’s expectation from
his job includes such higher order needs, employees will have high-growth
need strength, whereas those who expect their job to pay the bills and
satisfy more basic needs will have low-growth need strength. Not
surprisingly, research shows that those with high-growth need strength
respond more favorably to jobs with a high motivating potential. It also
seems that an employee’s career stage influences how important the five
dimensions are. For example, when employees are new to an organization,
task significance is a positive influence over job satisfaction, but autonomy
may be a negative influence.
OB Toolbox: Increase the Feedback You Receive: Seek It!
 If you are not receiving enough feedback on the job, it is better to seek it
instead of trying to guess how you are doing. Consider seeking regular
feedback from your boss. This also has the added benefit of signaling to the
manager that you care about your performance and want to be successful.
 Be genuine in your desire to learn. When seeking feedback, your aim should
be improving yourself as opposed to creating the impression that you are a
 motivated employee. If your manager thinks that you are managing
impressions rather than genuinely trying to improve your performance,
seeking feedback may hurt you.
 Develop a good relationship with your manager. This has the benefit of
giving you more feedback in the first place. It also has the upside of making
it easier to ask direct questions about your own performance.
 Consider finding trustworthy peers who can share information with you
regarding your performance. Your manager is not the only helpful source of
feedback.
 Be gracious when you receive feedback. If you automatically go on the
defensive the first time you receive negative feedback, there may not be a
next time. Remember, even if receiving feedback, positive or negative, feels
uncomfortable, it is a gift. You can improve your performance using
feedback, and people giving negative feedback probably feel they are
risking your good will by being honest. Be thankful and appreciative when
you receive any feedback and do not try to convince the person that it is
inaccurate (unless there are factual mistakes).
Sources: Adapted from ideas in Jackman, J. M., & Strober, M. H. (2003,
April). Fear of feedback. Harvard Business Review, 81(4), 101–107; Wing, L.,
Xu, H., Snape, E. (2007). Feedback-seeking behavior and leader-member
exchange: Do supervisor-attributed motives matter? Academy of
Management Journal, 50, 348–363; Lee, H. E., Park, H. S., Lee, T. S., & Lee,
D. W. (2007). Relationships between LMX and subordinates’ feedback-
seeking behaviors. Social Behavior & Personality: An International
Journal, 35, 659–674.
Empowerment
One of the contemporary approaches to motivating employees through job
design is empowerment. The concept of empowerment extends the idea of
autonomy. Empowerment may be defined as the removal of conditions
that make a person powerless. The idea behind empowerment is that
employees have the ability to make decisions and perform their jobs
effectively if management removes certain barriers. Thus, instead of
dictating roles, companies should create an environment where employees
thrive, feel motivated, and have discretion to make decisions about the
content and context of their jobs. Employees who feel empowered believe
that their work is meaningful. They tend to feel that they are capable of
performing their jobs effectively, have the ability to influence how the
company operates, and can perform their jobs in any way they see fit,
without close supervision and other interference. These liberties enable
employees to feel powerful. In cases of very high levels of empowerment,
employees decide what tasks to perform and how to perform them, in a
sense managing themselves.
Research has distinguished between structural elements of empowerment
and felt empowerment. Structural empowerment refers to the aspects of
the work environment that give employees discretion, autonomy, and the
ability to do their jobs effectively. The idea is that the presence of certain
structural factors helps empower people, but in the end empowerment is a
perception. The following figure demonstrates the relationship between
structural and felt empowerment. For example, at Harley-Davidson Motor
Company, employees have the authority to stop the production line if they
see a blemish on the product. Leadership style is another influence over
experienced empowerment. If the manager is controlling, micromanaging,
and bossy, chances are that empowerment will not be possible. A
company’s structure has a role in determining empowerment as well.
Factories organized around teams, such as the Saturn plant of General
Motors Corporation, can still empower employees, despite the presence of
a traditional hierarchy. Access to information is often mentioned as a key
factor in empowering employees. If employees are not given information to
make an informed decision, empowerment attempts will fail. Therefore,
the relationship between access to information and empowerment is well
established. Finally, empowering individual employees cannot occur in a
bubble, but instead depends on creating a climate of empowerment
throughout the entire organization.
 The empowerment process starts with structure that leads to felt
empowerment.
Source: Based on the ideas in Seibert, S. E., Silver, S. R., & Randolph, W. A.
(2004).
Empowerment of employees tends to be beneficial for organizations,
because it is related to outcomes such as employee innovativeness,
managerial effectiveness, employee commitment to the organization,
customer satisfaction, job performance, and behaviors that benefit the
company and other employees. At the same time, empowerment may not
necessarily be suitable for all employees. Those individuals with low growth
strength or low achievement need may not benefit as strongly from
empowerment. Moreover, the idea of empowerment is not always easy to
implement, because some managers may feel threatened when
subordinates are empowered. If employees do not feel ready for
empowerment, they may also worry about the increased responsibility and
accountability. Therefore, preparing employees for empowerment by
carefully selecting and training them is important to the success of
empowerment interventions.
OB Toolbox: Tips for Empowering Employees
 Change the company structure so that employees have more power on their
jobs. If jobs are strongly controlled by organizational procedures or if every
little decision needs to be approved by a superior, employees are unlikely
to feel empowered. Give them discretion at work.
 Provide employees with access to information about things that affect their
work. When employees have the information they need to do their jobs
 well and understand company goals, priorities, and strategy, they are in a
better position to feel empowered.
 Make sure that employees know how to perform their jobs. This involves
selecting the right people as well as investing in continued training and
development.
 Do not take away employee power. If someone makes a decision, let it
stand unless it threatens the entire company. If management undoes
decisions made by employees on a regular basis, employees will not believe
in the sincerity of the empowerment initiative.
 Instill a climate of empowerment in which managers do not routinely step
in and take over. Instead, believe in the power of employees to make the
most accurate decisions, as long as they are equipped with the relevant
facts and resources.

5. EMPOWERMENT

 empowerment is a management strategy that aims to give

employees the tools and resources necessary to make confident decisions
in the workplace without supervision.  Empowerment is a long-term,
resource-intensive strategy that involves significant time and financial
investment from the organisation’s leaders.
Hammer and Champy (1993) suggest that empowerment of front-line
workers is crucial if organisations want to understand core business
processes, because front-line workers are closest to these processes and
are the only ones who really understand how they work.
Authors Ken Blanchard, John P. Carlos, and Alan Randolph, in their
book Empowerment Takes More Than a Minute, suggest that the three
tools managers should be using to empower their staff are information
sharing with everyone, creating autonomy through boundaries and
replacing old hierarchies with self-managed teams.
Some of the perceived benefits of employee empowerment include greater
job satisfaction and motivation, reduced supervisory requirements and
increases in innovation and creativity. Disadvantages include increase risk
as staff become more entrepreneurial and more likely to take chances.
 Security can also be a problem because all important information must be
shared for employees to take decisions on their own.

6. SELF LEADERSHIP

One of the best ways to foster innovation and performance is through

autonomy. Even if you don’t have a leadership title within your
organization, you are still a self-leader.
Self leadership describes how you lead your own life – setting your course,
following it, and correcting as you go. Life and business are often
intertwined, so it also reflects how you work with clients, colleagues, and
the leadership in your organization. Self-leadership is something that needs
continual focus at the individual contributor and emerging leadership levels
of your organization.
What does it take to become a self leader? Below are five core qualities of
self-leadership that anyone can hone:
 Enthusiasm for learning. Almost all people I’ve met who are great self-
leaders are learning enthusiasts. They keep up with trends in their industry,
are well-read, and love to learn and share new information. I’ve also
noticed that they usually surround themselves with others who are also
learning enthusiasts.Case in point. Bill Gates is said to read about 50 books
a year, and he credits that for providing him an advantage.
 Goals for life and business. Because many of us live in a combined world of
the personal and professional, setting goals for business and life are critical.
Those who exercise self leadership take that a step further by monitoring
those goals and correcting the course when needed. One idea I incorporate
in my own life is to create a vision board. It allows me to dream big and
visualize what I want my life to be. Secondly, create a goal board – this can
be a white board of your yearly goals, broken down into quarterly or
monthly goals. As a manager or individual contributor, how are you
communicating and monitoring goal progress – outside of formal
performance evaluations?
 Willingness to let go. Self leaders have learned where to direct their time
and energy, and where to delegate. This action allows you to better lead in
 your areas of strength. It also allows you to create collaborative
relationships with your colleagues.
 Plans and schedules. Self leaders create plans and schedules they also stick
to them. For example, discipline may mean designating blocks of time for
creative work, or a scheduled time to check email and return phone calls. It
could also mean shutting down at a certain time each evening, or a
willingness to say no to non-essential work (or life) activities.
 Focus and discipline. It’s a fact that our brains can only truly focus on one
thing at a time to do a task well. This is even more critical when the task
involves creating thinking or problem solving (rather than a rote task). Self-
leaders have developed the skill of selecting what they want to focus on
and tuning out the rest for a set amount of time. They do their best work
and create better results.